To record amortization of goodwill, you need to make a journal entry that debits the amortization expense account and credits the goodwill account.
Goodwill is an intangible asset that arises when one company acquires another for more than its fair value.
Amortization of goodwill is typically done over a period of time, often not exceeding 15 years depending on applicable accounting standards.
The entry reflects the reduction in the value of goodwill on the balance sheet while recognizing the expense on the income statement.
When you record the amortization, ensure that the amounts and periods align with your accounting policies.
It’s crucial to monitor the carrying value of goodwill regularly to check for impairment.
If impairment is identified, you need to adjust the goodwill balance accordingly, which may involve a different journal entry.
Keep thorough records of your calculations and assumptions used for amortization and impairment assessments.
This ensures compliance with accounting standards and provides transparency in financial reporting.
Understanding the specifics of your jurisdiction’s accounting rules is also important.
Consult with an accounting professional if you have complex transactions or need clarification on goodwill amortization.
What is goodwill in accounting?
Goodwill in accounting represents the excess value paid over the fair market value of a company’s identifiable assets and liabilities during an acquisition.
How long is goodwill amortized?
Goodwill is typically amortized over a period not exceeding 15 years, according to the accounting standards applicable in many jurisdictions.
What is the journal entry for goodwill amortization?
The journal entry for goodwill amortization is a debit to the amortization expense account and a credit to the goodwill account.
How do I know if goodwill is impaired?
Goodwill is impaired if its carrying amount exceeds its fair value, which can be determined through valuation techniques or impairment testing.
Can goodwill be reversed if it’s impaired?
No, once goodwill is impaired, it cannot be reversed or restored in future periods, as per accounting standards.